Changes Ahead for Home Appraisal

By Sheryl Landrum
Home Worth Columnist

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No one in the mortgage and housing industry has escaped blame in the recent foreclosure crisis, and home appraisers are among those who have taken a lot of heat. Now, new laws are being designed to stop home appraisal fraud, which many believe is partly responsible for the current mortgage mess. What is home appraisal fraud, how are the new laws designed to stop it, and will these new laws prove effective in generating accurate home value appraisals?

The Pressure Was on to Bump that Home Value Up!
In the last year or so, some appraisers have been almost defensive about appraising a home's worth before going out and inspecting the house. Life was becoming difficult for them. If an appraiser didn't support the home value the loan officer wanted, they risked losing their business; however, if they couldn't realistically support the home value the loan officer wanted, they risked banishment from doing appraisals for the lenders underwriting the home loans.

New Laws Are Trying to Grant Home Appraisers More Independence
Beginning in 2009, Fannie Mae and Freddie Mac are instigating a few changes for home appraisers that could:

• Ban lenders from using in-house appraisers and appraisal companies that they own or control.
• Institute an 11-part "Home Valuation Code of Conduct," which all lenders dealing with Fannie Mae and Freddie Mac will have to follow, to eliminate 'coercion, extortion, collusion, and other means to influencing appraisals.'"
• Establish an appraisal-monitoring program called the Independent Valuation Protection Institution.
• Establish a consumer hotline monitored by the Office of Federal Housing Enterprise Oversight.

Mortgage industry experts do not agree whether or not these actions will help appraisers maintain independence from loan officers and lenders. Some say that both appraisal costs and approval times will elevate. Arguments for the new laws state that consumers will now be able to trust in their home values when appraised. As for me, I think that by using professional appraisers who are respected in the community, not pressuring them to give me a home value not supported by neighborhood comparisons, and by respecting and supporting their professional judgments, I can still offer my clients confidence in their home's worth and feel proud of the home loan that depends on it.
 
Source: New Standards for Home Appraisers by Roger Showley, The San Diego Union Tribune, March 4, 2008.


About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage of San Diego at the Prudential Realty Office in Bonsall, California.